Question:
Our clients successfully closed on the sale of their home today, but unfortunately, their purchase could not go through due to serious issues with the seller’s property.
It appears the seller’s home is subject to CRA lien and power of sale proceedings, and they have no funds available. How were these issues not uncovered by the lawyers during the due diligence process? Now, our elderly clients have nowhere to go but a hotel. Given the seller’s financial situation, what recourse do we have?
Answer:
Both on the sell and buy side, agents should purchase a Parcel Register for $30. Hopefully, any problems will be evident. The CRA lien is always last minute. Once that becomes clear, the lien holders may let it go. It will take the best of the week to sort it out.
The CRA lien will never appear on the Parcel Register until it’s far too late, if at all. You would have to do a search for executions. It should show up there, and then if they file an actual lien it would then appear on the Parcel Register.
The CRA will really not interfere with the sale, assuming it is a arms-length sale at fair market value. The CRA doesn’t want the property. It wants to be paid for the outstanding taxes. So, after a few days of negotiations the CRA will likely execute a release of the property.
The next problem is the first mortgage, now that their mortgage is “in arrears”. Is there any equity in the property? If so, then they will likely negotiate on a reasonable basis.
The difficulty is if the Seller owes more money than the funds coming in on closing. In that regard, in order to eliminate the remainder of the liens, and encumbrances, the first mortgagee should institute Power of Sale proceedings. That will wipe out the subsequent encumbrancers and permit good title to be conveyed. Your clients should surface as the new purchaser.
Brian Madigan LL.B., Broker